Buying a home in the city of San Luis Obispo

The water certificate comes before the deed records

A change of ownership in the city needs the City's water conservation certificate before the transfer can record. The City's code has the seller get the fixtures inspected and the certificate issued by the Utilities Department before the change of ownership, and lets the seller pass the retrofit to the buyer only with the Utilities Director's approval, so the closing date has to leave room for it. The City's certificate form calls for a licensed plumbing or general building contractor to do the inspection.

Sources:City of San Luis Obispo Municipal Code, section 13.06.040City of San Luis Obispo Municipal Code, section 13.06.050City of San Luis Obispo, certificate of conservation form

Fire zones, the sale disclosure and the insurance policy

The City adopted the State Fire Marshal's updated zones by ordinance and, as its news page says, could not lower any of them. In a High or Very High zone, State law has the seller give the buyer documentation of defensible-space compliance at sale, and new buildings and major remodels follow the State's ignition-resistant building chapter. The City's own home hardening standards now apply to new construction and additions anywhere in the city, with a defensible space chapter for the Very High zone. The City's guidance is that insurers rate wildfire risk with their own tools rather than with the State's map.

Sources:City of San Luis Obispo, fire hazard severity zone map adoptedCity of San Luis Obispo, Ordinance 1748California Civil Code section 1102.19City of San Luis Obispo, wildfire preparedness

Four creeks and the City's flood map

FEMA maps special flood hazard areas inside the city, a floodway among them, and the City keeps its own flood map beside FEMA's. Development in a floodplain has to meet FEMA's requirements, which the City says typically means elevating a home above the base flood elevation, and the City's brochure says it will make a flood zone determination for a property on request.

Sources:FEMA Flood Map Service Center, San Luis ObispoCity of San Luis Obispo, winter weather preparedness and floodplain managementCity of San Luis Obispo, flood brochure for properties in or near a special flood hazard area

Rental income has firm limits here

Vacation rentals are a prohibited use in all zones. An ADU or junior ADU can be rented only for terms of thirty days or more and cannot be a homestay, and a homestay is allowed only in the owner-occupied dwelling, under a permit that a new owner has to apply for again within sixty days of the transfer. An investment plan built on short stays does not fit the City's rules.

Sources:City of San Luis Obispo Municipal Code, section 17.10.020City of San Luis Obispo Municipal Code, section 17.86.160City of San Luis Obispo Municipal Code, section 17.86.020

Special taxes in Avila Ranch and San Luis Ranch

The City formed a Mello-Roos community facilities district in Avila Ranch and another in San Luis Ranch to finance the infrastructure it required, and the County lists each as its own line on the property tax bill. In Avila Ranch, the workforce homes are deed-restricted, and on their first sale the developer's down payment assistance comes as a silent second loan, repaid when the home is sold or refinanced.

Sources:San Luis Obispo County, Avila Ranch community facilities districtSan Luis Obispo County, San Luis Ranch community facilities districtCity of San Luis Obispo, Avila Ranch workforce housing

Historic districts and the Mills Act

Downtown, Chinatown, Mill Street, Old Town and Railroad are the City's five historic districts, where alterations to a historic property and new construction are evaluated under the City's preservation guidelines. A property on the City's Master List of historic resources can enter a Mills Act contract, which the City describes as property tax savings in exchange for preserving the building; its brochure says the savings stay with the property and pass to the new owner when it sells.

Sources:City of San Luis Obispo, historic preservationCity of San Luis Obispo, Mills Act brochure

Pre-qualification letter in San Luis Obispo

In the city of San Luis Obispo, the listing agent reads your pre-qualification letter against the program it names and the closing date your offer proposes. Here the seller needs the City's water conservation certificate before the transfer can record, and the code calls for the fixtures to be inspected first. The timeline beside your letter has to leave room for that. In a High or Very High fire hazard severity zone, the insurance premium is part of the payment a lender qualifies you on. The City's own guidance is that insurers rate wildfire risk with their own tools rather than with the State's map, so the premium comes from the insurer's rating of the parcel. In Avila Ranch and San Luis Ranch, a Mello-Roos special tax is its own line on the tax bill, and a lender counts it in your housing payment. Because USDA's map places the city in its ineligible area, your letter here will not name a USDA loan. If the home is above the county's conforming limit, your letter has to name a jumbo loan rather than a conventional one. Our letter states the program and the amount your file supports, and says plainly that it is not a commitment to lend.

Sources:FHFA conforming loan limits by countyCity of San Luis Obispo Municipal Code, section 13.06.040City of San Luis Obispo, wildfire preparednessSan Luis Obispo County, Avila Ranch community facilities districtSan Luis Obispo County, San Luis Ranch community facilities districtUSDA Rural Development, property eligibility map

More about pre-qualification letter

Investment property in San Luis Obispo

In the city of San Luis Obispo, the rent a DSCR lender can count comes from tenancies. Vacation rentals are a prohibited use in every zone, and a homestay is allowed only in the owner-occupied dwelling, under a permit. So the rent a DSCR lender reads on your purchase is the long-term market rent on the appraiser's schedule, never a nightly rate. An accessory dwelling unit or junior ADU may not be rented for less than thirty days under the City's code, and neither may be a homestay. An ADU you finance to rent is therefore qualified on a monthly tenancy as well. The City approves an ADU that meets its standards by building permit, without a hearing. In the city, then, your numbers as an investor start from a lease and not from a nightly calendar.

Sources:City of San Luis Obispo Municipal Code, section 17.10.020City of San Luis Obispo Municipal Code, section 17.86.160City of San Luis Obispo Municipal Code, section 17.86.020

More about investment property